What Are the Benefits of Advisory Boards for Startups?
There’s enough competition in the startup space that new companies need to pull out all the stops to be successful. Great ideas and passion will only take your startup so far. Your founders and board members won’t always have the necessary expertise you need in every area to be competitive and sustainable. An advisory board can be of great assistance to your startup by filling crucial gaps in your leadership talent.
At some point, startups commonly reach a point where they lack some knowledge and certain skills internally. Whether it’s related to a technical issue, a funding issue, or something connected to the industry, adding the right members to your advisory board can help you transcend barriers and rise to the top.
Startup boards need to understand a few essential things about the role of advisory boards—the advisory board’s role, what you can expect them to bring to your startup, and how to find the best players for your team.
What Does It Mean to Be a Startup Advisor?
Let’s begin with the definition of the role of a startup advisory board member. A startup advisory board member is different from a mentor or consultant. Something that’s confusing about advisory boards for startups is that while they’re part of a group, they don’t necessarily function in a group capacity. An advisory board generally doesn’t meet together on a regular basis, if at all. They also don’t have any legal responsibilities and they’re not held to the same fiduciary duties as regular board members.
Now that we’ve mentioned what they don’t do, exactly what do startup advisory boards do? As needed, advisory board members for startups consult with founders, board members, and executives individually and collectively, on an as needed basis.
Generally, board members for startups write up agreements for advisory board members that outline their roles, and typically compensate them with equity.
Unlike advisory board members, mentors consult informally, and they don’t get paid. A consultant’s role is also different because they advise boards in a similar capacity as advisory board members, but they usually only give advice on certain specific tasks and they get paid for their time.
You might be wondering at what point a startup company should form an advisory board. Generally, the best time to establish an advisory board is when the startup hires key staff or when they’re trying to build sales and establish partnerships. The right advisory board members will have broad networks that can help you connect with outside vendors and identify the best talent for your employees. Your advisory board members may be people who have vast industry experience or who have been successful in other businesses. You may decide to ask certain people to be members of your advisory board to help you tackle distinct challenges that you’re not familiar with.
The Benefits of Advisory Boards for Startups
Founders usually have a great deal of experience, yet, most people don’t have enough expertise in every area of the business. They’re often lacking in specific areas like human resources, compliance, or industry knowledge.
Here are some of the benefits you can expect from your startup advisory board:
- It gives you the advantage of advice from multiple experts from various industries like hiring, tech, and legal.
- Advisory board members fill in the gaps in the founding board’s existing knowledge.
- An advisory board helps the founding board make better-informed decisions.
- Advisory board members help to solve complex problems.
- Board members can get expert guidance about investing decisions.
- Startup boards can learn more about establishing efficient workflows.
With the role of the advisory board defined, how do you find advisory board members for your startup?
How to Find Advisory Board Members for your Startup
The best place to find members of your startup advisory board is within your very own network. It’s common for mentors to become formal advisors if they’ve been valuable to you in the past and you’ve been able to form a trusting relationship with them. By working with them in an advisory board capacity, it gives you a chance to build on that trust as you continue to build your business. Startup advisory board members usually have a more objective perspective and they’ll serve you well as an extension of your leadership team.
Choosing your advisory board should be more than a matter of picking someone from a particular industry out of a hat. It’s important to screen advisory board candidates, just as you would screen an employee. In forming this new relationship, it’s crucial to come to agreement about what both parties expect. It’s appropriate to craft a formal agreement that outlines the length of the relationship, the advisory board members’ duties and responsibilities, and the agreed compensation, which is usually in the form of equity.
Beyond your personal and professional networks, you might ask your angel investors about people they know who would make valuable advisory board members. Angel investors generally have very large networks, so this is a good source to tap into. Even if angel investors aren’t interested in supporting your business, they may be willing to connect you with people who can help your business grow and thrive. Venture capitalists also usually have a broad network of various professional experts within their portfolio companies. They may know of someone that may be a good fit for your advisory board.
Be careful not to give advisory board members too much equity and be sure to spell out the conditions of their share of the equity in a written agreement. Advisory board members are not necessarily static. The needs of a startup can change abruptly. Your founding board may opt to review the composition of your advisory board every six months, or so, to identify advisory board members that aren’t serving their intended purpose. Advisory board members that have the right motives may offer to step down, once they’ve contributed all that they can.
Entrepreneurs bring ideas to the marketplace. Your startup company brings a great deal of value to our economy. It will create products and jobs, and a little disruption is good for healthy competition. There are many details to tend to as you develop your startup. A BoardEffect board management portal is the best resource for your startup’s hub of activity. It’s the place where all the details and business cycles come together in a single source. Despite many obstacles, starting a new business Is a worthwhile venture. An advisory board gives you the right expertise, at the right time, to build a thriving, sustaining business.